For companies who decide to implement this type of solution, the benefits of RegTech are many, as is generally the case when you decide to integrate elements of technological innovation into your business.
However, the benefits of RegTech deserve separate consideration, since they intervene on an aspect that represents a raw nerve for many Italian entrepreneurs (and not only), that is, the relationship with bureaucracy and the regulatory systems established by the legislator.
The theme is anything but secondary, if only because it is still perceived as topical and many hope for a rapid and effective solution.
On this point, for example, the CNA, the Italian confederation that collects and represents the sector of artisans and small- and medium-sized enterprises, carried out a study on the costs of bureaucracy incurred by companies, the results of which are revealing.
According to this analysis, businesses spend an average of €5000 per year to fulfill regulatory and bureaucratic obligations, or €16 per day, €2 per hour. Taking into account the findings that emerged from the observations of 1,000 companies, the annual cost is enormous: €22 billion per year, which is only a fraction of what is spent in Italy.
The research goes on to point out that this is just one of the expenses that companies have to incur in dealing with the Public Administration: in addition to the financial requirements, it’s also necessary to spend a lot of time to make sure that all requirements are met correctly.
In particular, CNA points out that 41.3% of companies take up to three working days per month to carry out all the regulatory and bureaucratic requirements, 32.2% say that up to five days are necessary, while 9.1% say they need up to ten days, and 6.8% report that they need more than 10 days.
Technology as an answer to systemic regulatory inefficiencies
There are two factors that make dealing with bureaucracy so costly.
The first is the number of regulatory requirements, which often tend to increase over time as there are multiple layers of legislation, ranging from national, to international, to sector-specific, and business-specific.
The second is that the reference norms and the requirements often change over time, making their application tortuous and not always straightforward for those who are not experts in the field.
This explains why around 46% of companies always need to use a consultant to manage their relations with bureaucracy, while 36.6% say they use one “often.” This, too, represents a constant drain on the company’s resources, which cannot go back into the business.
Although the situation is gradually improving thanks to some targeted legislative interventions, to reduce this friction between the two worlds – the entrepreneurial and the bureaucratic – it’s clear that an acceleration is needed that only digitalization can provide. In this sense, RegTech plays a fundamental role, not only for companies, but for the entire country system.
It is no coincidence that there is a movement to make it possible for the Public Administration to adopt the typical RegTech logic.
The most recent and significant examples of these efforts made by the legislator towards digitization are two. The first is the introduction in Italy of the electronic invoicing obligation, starting from Directive 2014/55/EU. This imposed, first on the Public Administration and then on all companies, the prohibition of accepting and issuing invoices in paper format, simultaneously establishing the obligation to accept and produce only and exclusively invoices in digital format both between companies and freelancers and towards final consumers in all cases of the transfer of goods or services.
The second, on the other hand, is the Decree Law for “simplification and digital innovation,” which was approved in February of this year. This law imposes some specific obligations on the Public Administration, including:
1) Integrating SPID (Sistema Pubblico di Identità Digitale – Public Digital Identity System) and CIE (Carta d’Identità Elettronica – Electronic Identity Card) into their information systems as the sole identification system for access to digital services;
2) Integrating the pagoPA platform into its revenue collection systems;
3) Starting the digital transformation projects necessary to make its services available on the IO App.
It is precisely this decree that aims to make authentication systems more effective and immediate, preferring digital and dematerialized ones to paper ones, so as to “effectively standardize access to digital public services throughout the country.”
The benefits of RegTech for an entire country
It’s clear that these steps represent a huge leap forward for the whole of Italy, which is setting up a less problematic and more efficient type of relationship with its business sector.
On the other hand, never before has it been more evident than in the past two years that digitalization is as inevitable as it is fundamental for the growth of a country and for maintaining a high level of competitiveness on the national and international markets.
Simplification, in fact, is an important factor when it comes to attracting foreign investors, who go where investments and productive efforts are not hampered due to bureaucratic red tape.
In addition, when we talk about the digitalization of the Public Administration (and of a country in general) we inevitably talk about security, since the network, thanks to certain solutions, is often a tool for storing data and information that is much more reliable than a physical safe.
And the benefits for every company
It’s interesting to note that this also applies to every company, whether in the banking or insurance sector or in many other areas of business.
In fact, regardless of the segment in which they operate, all companies can derive significant benefits from the implementation of RegTech solutions which, curiously enough, harmonize perfectly with the benefits described above, demonstrating that the path traced by digitalization is only effective if all parties are on it.
Before going into detail and describing the main benefits of RegTech, it’s worth making a premise: if it’s true that RegTech is positive for all companies that decide to implement it, it’s equally true that some of these advantages may weigh more than others depending on the business in question.
However, even in light of the trend indicated above, as time goes on, the relevance of these benefits is bound to increase, as they will radically change how a business operates.
The first benefit: savings
As mentioned above, bureaucratic obligations represent a cost, above all. RegTech solutions, on the other hand, realize significant savings that manifest themselves on several fronts.
The first saving is the reduction of operational risks, which is linked to the fact that part of the manual phases of the processes of managing regulatory compliance can take place autonomously thanks to solutions such as Artificial Intelligence and machine learning, thus avoiding the use of ad hoc manpower.
Another savings is related to the workforce: using RegTech allows you to drastically reduce the number of staff who must deal with monitoring and managing compliance.
The most repetitive and mechanical tasks can be entrusted to automation systems, thus giving the company the opportunity to employ its employees in activities with higher added value.
The second benefit: more value for time
A specific aspect of the above savings, but one that deserves a separate space, is that of time.
Thanks to RegTech solutions, in fact, regulatory compliance takes less time on average, and this is again thanks to automated technologies: Through RegTech, companies can use their time more effectively, without waste and inefficiency.
Also regarding time, there is the advantage linked to deadlines: RegTech solutions make it easier to organize the various deadlines established by law, deadlines that many companies live by. By digitizing the control processes, it is easier to have all deadlines under control and to prepare in advance for fulfilling them, thus avoiding delays.
The third benefit: security
RegTech solutions are also synonymous with security and this is thanks to the technologies that can be implemented in the company, such as Blockchain, which is the widespread and unchangeable register through which it is possible to collect and track business assets, whether tangible (houses, cars, money, land) or intangible (intellectual property, patents, copyrights, trademarks).
The great security provided by this type of technology derives substantially from two aspects: the first is the fact that once entered within one of the nodes of the Blockchain network, the information is no longer modifiable unless you have a specific key that authorizes it.
The second security factor is given by the traceability: every action that is made along the Blockchain leaves a trace; in this way it is always possible to trace the entire chain of modifications, transfers, and operations that are made until arriving at the point of origin.
This is especially important at this stage, when most transactions are done digitally and most documents are no longer on paper.
Fourth benefit: Dematerialization
The security provided by RegTech systems has the great benefit of making it easier to achieve one of the most important objectives for any modern company, namely dematerialization.
In the near future, in fact, more and more players will be moving toward replacing paper in favor of digital media, which ensures a more orderly management of operations and, above all, the elimination of a particularly heavy burden, namely physical archives.
As we have already said in other posts, dematerialization cannot be limited to the elimination of paper from invoicing and archives; instead, dematerialization is a real “revolution” of the entire production process, which must involve every phase of the business.
One of the benefits of RegTech systems is precisely this: allowing this transformation to take place in absolute security, preventing dematerialization from becoming a weakness that exposes the company to additional risks and malfunctioning.
On the contrary, RegTech can be a perfect “outpost” of digitalization, in which to experiment with some solutions that can then be extended to the different areas of the company, with maximum security.
Fifth benefit: optimization
If it is true that RegTech saves human and monetary resources, it is equally true that it significantly improves the efficiency of production by optimizing the business from all points of view.
First of all, data management is optimized, and in addition to being centralized, it is automated, making it easier, for example, to store and retrieve documentation.
Among other things, RegTech makes it easier for companies to collect and analyze data, and to obtain valuable information about critical issues and areas of weakness on which to intervene in order to anticipate and avoid possible risks or failures.
As a consequence, RegTech also allows the company to optimize its production capacity, which, thanks to automated solutions, does not run the risk of having setbacks, but rather adapts perfectly to both production and compliance needs.
Sixth benefit: competitiveness
The last benefit of RegTech, on closer inspection, is the consequence of all the other benefits described above, i.e. making every company more competitive and able to move effectively within the markets where they operate.
It is now clear that digitization is a decisive competitive factor as well as an indispensable tool that guarantees a sustainable organization and makes it possible to offer consumers products or services that meet their expectations.
But there can be no digitization without RegTech; on the contrary, it is precisely RegTech that facilitates digitization, combining compliance with production logic.
In other words, it represents a key point of synthesis, capable of bringing added value at all levels for the company, consumers, and the entire country.